Empower Blog

March 10, 2021

Top 5 Factors That Impact Your Credit Score

Credit Cards, Financial Planning

March is National Credit Education Month and I wanted to take it back to the basics on what factors go in to computing your credit score so that you can be sure you are making smart decisions that will boost your score in the long run. Here are the five most common factors that will have the biggest effect on your credit score:

1. Payment History

Your payment history is without a doubt the most important factor taken into consideration when calculating your credit score — it only takes one missed or late payment to mess up your score. When looking over your credit, lenders will want to see that you are going to be able to not only pay back your debt but pay it back on time. If you find yourself falling behind on payments, try not to let it go past 30 days late. The later you are on your payments, the greater the damage will be to your score. Talk to your lender about moving your due dates or other possible plans they have in place to help get you back on track.

2. Credit Utilization

Credit utilization is the amount of your credit limit that you have used, expressed as a percentage, and is the second most influential factor in determining your score. Less is more when it comes to credit utilization. It is recommended that you use no more than 30% of your available credit. If you find yourself using more than the recommended 30%, do what you can to get it down below that line as soon as possible such as setting balance alerts or making extra payments here and there throughout the month. Paying down a high balance will be reported to the credit bureaus and can boost your score back up quickly.

3. Length of Credit History

You might want to hold off on closing that old credit card that you do not use anymore. One would assume that closing out old loans and accounts would be a good thing, but this is actually not the case when it comes to your credit score. Unless you have an old credit card that is charging you a ridiculous annual fee, it is not going to hurt you — or your score — to keep that open. Generally, the longer your credit history, the higher your score will be and closing out that oldest trade line could absolutely knock you down a good amount.

4. Types of Credit

This is an easy one — the more diverse your credit history, the better your score is likely to be. All loans are different and having these diverse types of loans in your credit history — such as an auto loan, mortgage, credit cards, student loans, etc. — is an indication of how well you are able to manage different credit products.

5. Credit Applications and New Accounts

When applying for a new loan, you are most likely going to have your credit pulled and if it is an application that causes a hard inquiry, it might knock you down a few points. The exception to this is if you are “shopping” and the credit pulls are classified in the same category, i.e., buying a new car.  In this scenario, as long as the shopping is contained to less than 45 days from the initial pull, only one inquiry will be counted during this time. There is nothing wrong with opening new accounts, when needed, as long as you have thought it through. Every new account brings a new risk to hurt your score, but if you have a plan in mind that makes sense for you, it can be helpful toward financial success.


Everyone’s credit history is different but being aware of your credit history, establishing good financial habits, and remembering these five factors will point you in the right direction of building that perfect score.

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About the Author
Professional Picture of Kat Hnatyshyn
Kat Hnatyshyn

Branch Manager

Kat’s Money Corner is posted in the Kansas City Star every week. When not blogging or caring for her little ones, Kat is a manager with CommunityAmerica Credit Union.